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The 4 truths of the economy, told by an eminent expert

It is under the title of “Execution of the state budget 2022: the mark of a political impotence”, that the latest column of Ecoweek by Professor Hachemi Alaya begins this sharp criticism of the state of the economy in Tunisia. But also, the management of this situation by the Bouden government, mainly in its economic and financial components. That criticism did not prevent him from correcting upwards the growth figure of the INS to 3.1% for the 3rd quarter of 2022, against the official 2.9%. A Tunisian growth, which he had already said, in a previous column, “growth without growth”, calling it the only real Tunisian miracle. Engaged in economic choices of short duration, and overwhelmed by an international situation, sometimes managed haphazardly, the Tunisian economy does not seem to have good prospects.

1st truth: drifting accounts against a backdrop of fiscal harassment

“The government’s all-out budgetary austerity has reached its limits. Boosted by salaries, the debt burden and subsidies, public spending has returned to its former pace. The hunt for savings is limited to ideas worn out to the bone (…)”, says Professor Alaya. A hunt for savings, which has pushed the Tunisian authorities to ration the import of certain consumer products. And having failed to balance a highly deficit trade balance (More than TND 21.322 billion) we try to lobby against the import of consumer products.

The economist added that “increasingly powerless to act through the economy on spending to change the course of things, the policy is limited to the drift of accounts amid tax harassment (almost a tax inquisition) and hunting fraudsters. A path on which the government seems to engage for its budget project 2023; a dead end in reality, because Tunisia is already in the antechamber of tax hell and does not harbor any hidden pot. Alaya, who is clearly not just a bitter critic, gives the solution. “The real way forward for the country is to restore meaning and efficiency to public spending. But who will hear him in the rush to find resources to meet the most urgent needs?

2nd truth: Atypical budget execution and giving up planned expenditures

The World Bank said it already in its latest “Systemic Diagnostic” of the Tunisian economy (Pdf) published last September: since 2011, Tunisia has plunged into the economic system of the welfare state, especially through the subsidy of everything, including sugar, coffee and tobacco. A policy made even more necessary after the crises of COVID and the war in Ukraine. At the end of August, the Tunisian budget spent TND 6.9 billion in interventions and transfers and TND 14 billion in wages for the civil service alone, compared with TND 2.258 billion for investment.

And the economist Hachemi Alaya concluded that “the policy of systematic compression of public spending is faced with the limits imposed by the policy of price subsidies.” According to the expert, “despite the good performance of tax revenues (they are up +18.7% in one year), the government is still far from achieving the goals it set in the Finance Act-2022 and continues to repress spending other than salaries, debt service and subsidies. An economic policy, put into practice by a system of budget execution (allusion to the Minister of Finance), that H. Alaya considers “atypical marked by the abandonment of spending planned in the budget, the “decrease” of the budget deficit at the end of August 2022 (-3.0 billion dinars after -4.4 billion at the end of August 2021) is purely artificial.

3rd truth: The state is experiencing difficulties in finding donors

On the issue of public debt, whose stock stood last August at TND 109.6 billion, up only 8.3% year-on-year, the Tunisian economist who heads the Think-Tank “TEMA” corrects what could be taken for a success, a positive point in the execution of the budget by the Ministry of Finance, or a 1st since 2010, by stating that “the dynamics of public debt was stopped in 2022 as a result of the difficulties of the Tunisian state to find donors, and is increasingly faced with difficulties to find foreign donors.

The Tunisian government is well aware of this, and has not tried to convert the SLA (Staff Level Agreement) obtained from the IMF into credits to be sought on the international financial market, and even seems to have given up the idea of going on a “Road Show” to collect what would be left over after the USD 1.9 billion it had hoped for at the start of negotiations with the IMF. An agreement that is now even questionable, even becoming an object of intergovernmental controversy.

4th truth: Collateral victim of international crises; this will not change in 2023

It is known, the Tunisian economy is structurally linked to the outside, both in imports of raw materials and semi-products necessary for its industry that simply processes or in exports where the share of Europe approaches 80%.

Hachemi Alaya already warned that “the two main partners of Tunisia will see their growth decline sharply: +0.6% in 2023 after +2.6% in 2022 for France and +0.2% after +3.4% in 2022 for Italy. For the OECD, the war that Russia is waging in Ukraine increases the risk of overindebtedness in low-income countries, but also of food insecurity.

Always a collateral victim of what happens economically outside its borders, and economically fragile addicted to the butterfly effect, it is not tomorrow the day that Tunisia will achieve the growth that would get it out of the rut. Alaya sees a way out. “Asia will be the main engine in 2023 and 2024,” he says. However, if the Tunisian economy is strongly linked to a country like China (TND 7.5 billion in imports in October 2022, against a small TND 19 million in exports) or Russia (TND 2.4 billion in imports last October, against TND 0.36 billion in exports) its exports to this country are minimal. China is trying in vain to break into Tunisia and is hardly encouraged. For Russia, the vote of Tunisia in the issue of Ukraine, says a lot about the prospects for trade development!


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